Anyone who has ever been in debt can imagine how good it would feel to be debt free. For many, that goal spurs them on to keep repaying their debts and in some cases overpaying debts to erase debt more quickly.  Everyone in debt would like to be debt free, whether that debt is their mortgage, their credit card, their overdraft or a loan, but not everyone would need to consider bankruptcy. The consequences are serious and it is really seen as a last resort – something they simply don’t need to think about. But sometimes, even with the best intentions, bankruptcy is the only option.

Bankruptcy has a serious effect on your finances and your ability to borrow money again in the future, as it is recorded on your credit file for up to six years. You may lose your property – and bankruptcy wouldn’t wipe out part of your mortgage, as it could write off unsecured debt. Even if you applied for a mortgage further down the line, you would probably still have to declare your bankruptcy, which could make it more difficult to get a good deal.

How to deal with bankruptcy

If you have been bankrupt, or are still going through bankruptcy, there are a number of things you can do to start getting back on your feet financially, given that you may be required to make payments for up to three years and it would be difficult to borrow money for six years following bankruptcy.

One step you could take following bankruptcy is opening a bankruptcy bank account. Bank accounts for bankrupts are open to people with a history of bankruptcy and can even help undischarged bankrupts still going through the process. These people could easily be turned down when applying for other bank accounts.

Budgeting your way out of bankruptcy

You’ll need to be on top of your finances to avoid further debt problems, and even potentially having to think about bankruptcy again.

Some people rely on an accountant to help them manage their personal finances and tax affairs. If you don’t think you need (or can afford) one, anyone could certainly benefit from improving the way they manage their finances themselves – drawing up a budget of their income and expenses to identify what they spend their money on and where they could cut back.

Drawing up a budget helps people to divide their spending into essentials and the things they like – such as gym memberships, expensive meals out or subscription television. When you’re looking to cut back on your spending, assess what you can live without and try to cut some unnecessary expenses out of your life.

More tips following bankruptcy

After bankruptcy, repairing your credit score should be a priority. Do your very best to pay bills in full and on time. Don’t make lots of applications for credit – if you’re turned down multiple times (which is likely following bankruptcy), this could put off potential future lenders.

If you open a bankruptcy bank account, there’s no overdraft so you can avoid getting into the habit of relying on more borrowed money.   And finally, remember to update your budget regularly as your circumstances may change.